5/25/2006 @ 1:09PM

Whistleblower Watkins Vindicated By Enron Guilty Verdicts

Nearly five years later, Sherron Watkins may feel like the most vindicated woman in America.

She is a former vice president of
Enron
. And if anyone had listened to the conscientious number-cruncher in 2001 when she played despised Cassandra, voicing omens of potential financial doom, well, history could’ve turned out differently for the collapsed energy trader. And there might be no Sarbanes-Oxley Act.

But Kenneth Lay didn’t listen.

Lay and Jeffrey Skilling were chairman and chief executive, respectively, of Enron.

They were also the dubious stars of the so-called Enron Trial. After the company’s spectacular demise, it was but one of many legal wrangles in the aftermath–but this one featured the defunct firm’s two highest ranking ex-execs, fighting for their lives.

Skilling attorney Daniel Petrocelli attempted to place the blame for Enron’s bankruptcy on many heads: He blamed the tech and dot-com meltdown and skittish investors. And he lambasted ex-Chief Financial Officer Andrew Fastow, the key prosecution witness who’d already pleaded guilty to wire and securities fraud in 2004, and accepted ten years in the hoosegow.

Fastow alleged that the questionable financial instruments he’d helped create, such as LJMs and the carnivorously-monikered Raptors, were pumped up at Skilling’s behest to help hide ballooning Enron debt from investors and Wall Street analysts. The paper trail, though, was not forthcoming. Petrocelli skewered Fastow as a thrall to “insatiable greed”–and the disgraced ex-CFO squirmed.

But Sherron Watkins was a different story: In the moral sense, an unimpeachable witness, Watkins took the stand in March, claiming that she’d warned Lay and other top execs of impending problems at the firm.

Her August 16, 2001 memo to Lay, as excerpted in published reports, opined, “It sure looks to the layman on the street that we are hiding losses in related partnerships and will compensate that company with Enron stock in the future.” Months after her meeting with Lay, she learned that her “reward” for trying to rescue Enron was a series of secret threats to her job.

Per the LJMs and Raptors, Watkins had testified that, “Accounting just doesn’t get that creative.” Today, the jury agreed.

On Thursday, Lay and Skilling’s 12 peers returned their verdict at 12 noon EST. The fallout: Skilling was found guilty of 19 of the 28 counts against him. He was convicted of one charge of conspiracy; one charge of insider trading; five charges of making false statements; and 12 charges of securities fraud. He was acquitted of nine charges of insider trading.

Lay–who also founded the company he was charged with destroying–was found guilty of one count of conspiracy; two counts of wire fraud; and three counts of securities fraud.

At the extreme end of legal possibilities, each former C-level executive could get over 150 years in the slammer. Even with the ever-increasing human lifespan, that would likely mean the rest of their mortal existences.

Before you shed an empathetic tear for the accused and convicted, keep something else in mind–besides the long corporate knives aimed at Watkins’ unsuspecting back: The bum market of 2000 to 2001 hurt plenty of firms like
Lucent
,
Cisco Systems
and
Sun Microsystems
. But none of those firms had financial instruments with mind-boggling names like “Deathstar.” That honor belongs to the company Lay and Skilling ran: Enron.